Procter & Gamble (PG -0.80%) has achieved something that few others have. Not only is it one of the world's largest consumer staples companies, but it is also a Dividend King with a 70-year streak of annual dividend increases. That is the longest streak among consumer staples makers, with the next-closest streak held by Coca-Cola (KO +0.23%) at 64 years.
Here are three reasons why P&G has built such an impressive dividend history, all of which are good reasons to buy the stock and its 2.9% yield today.
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1. Brand strength
Consumer staples companies are driven by the brands they own. Procter & Gamble's brands are household names, like Bounty, Tide, Charmin, Always, Gillette, Dawn, Old Spice, Crest, and Ivory, among many others. What's particularly important about these brands is that they tend to operate at the high end of the market, which helps support strong margins for P&G. However, its brands are often category leaders, which draws shoppers into stores. That makes the company a key partner for its retailer customers. It would be difficult, if not impossible, to recreate the brand portfolio that P&G has spent more than 100 years building.
2. Size and reach
Good brands are the foundation. As noted, P&G is one of the world's largest consumer staples companies. It also has a powerful distribution system, allowing it to reliably supply its retailer customers with products. And it has the marketing wherewithal to support those customers with ad dollars.
NYSE: PG
Key Data Points
But that's not all, P&G's size also gives it the ability to buy smaller brands as it shifts its portfolio to keep pace with consumer buying habits. On that front, it recently agreed to buy Thorne, a company that makes products such as creatine, whey, and electrolyte drinks. The move will expand P&G's reach in the wellness space, which is increasingly important to consumers.
Companies don't start out with P&G's scale. It takes decades to build up to this point. And with P&G already so far ahead, it stands out from the pack.
3. New and improved
Another benefit of the company's scale is its massive research and development capabilities. This factor, however, has to be broken out separately because the terms "new" and "improved" are so important in the consumer staples sector. In fact, part of the company's ability to charge more for its products stems from offering products that provide consumers with real benefits. That is driven by ongoing innovation provided by a powerful R&D platform. As with the other two points above, you simply can't replicate P&G's capabilities here overnight.
The proof is in the dividend
The consumer staples sector is out of favor, with rising inflation leading consumers to pull back on spending. That's a key part of why P&G's stock is down nearly 20% from its 2024 high despite operating an industry-leading business. The price drop has pushed the yield up to 2.9%. This is likely to be a long-term buying opportunity for a Dividend King with such a wide moat supporting its business.
